A blog about creating value in your organization through supply chain excellence
by Jim Tompkins, CEO & President, Tompkins International, supply chain consulting

Online Sales Tax Bill: How Does it Click with Amazon’s Long-term Strategy?

Retailers, both online and brick-and-mortar, have been closely watching new legislation being debated in Congress.

Recently, the US Senate passed the Marketplace Fairness Act, which requires online retailers generating more than $1 million in “remote” sales to collect sales tax in the state where they ship their orders. The bill is gathering some rare bipartisan steam and will soon go to the US House of Representatives for a vote.

The bill is not perfect, of course, and is likely to be widely dissected and debated. A number of businesses contend that the costs of compliance will be overly burdensome. What are your thoughts on the proposed online sales tax? Will it affect your business?

The interesting thing, to me, is to view this development through the “Amazon Effect” and “Amazon Cure” lens. It’s really a step that CEO Jeff  Bezos has long anticipated. As another example of Amazon’s remarkable retail and business strategy, they began preparing for an online sales tax bill some time ago.

Amazon is now able to position itself so that its competitive advantage continues to be solid. Knowing that a national sales tax would be likely to exist in the future, Bezos made operational decisions to create local fulfillment centers near their customer bases. Same-day delivery is Amazon’s goal with these e-fulfillment centers, showing that they understand customer preferences.

Amazon does the four pillars of retail success right: They bring customers great prices, awesome selection, best-in-class convenience, and a great experience. Same-day delivery puts Amazon ahead of the game, and their long-term strategy, whether an online tax bill is passed this year or not, shows that things are falling into place for their continued success.

Amazon is everyone’s competitor, regards of your industry. Considering the long-term planning that Amazon has in place for now and in the future, do you have a strategy to compete? For more on how Amazon gets it right – succeeding with long-term thinking and supply chain strategies – watch this video.

If you are having trouble viewing the video, please click here to view with an alternative video player. You can also access YouTube’s help pages here.

More resources:

Video: The Amazon Effect

White Paper: Leveraging Supply Chains for Increased Long-Term Value

Article: “Did You Find Everything You Were Looking For?” What In-Store Customers Want

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The Dos and Don’ts of Selling to Customers in China: How to Avoid Getting Caught Between the Tiger and Dragon

selling-to-customers-in-chinaYou may be debating whether or not to conduct business in China. Or perhaps your company has already entered the market in Asia and finding it to be a difficult path.

There’s no doubt that China presents a huge opportunity through its growing class of consumers that are hungry for new products. But can you frame your selling propositions the same way you would for a North American sale? What changes would you need to make?

In the recent Harvard Business Review post, “When Best Practices Don’t Travel,” Michael Zakkour and Andy Molinsky offer advice on what exactly you should do—and more importantly should not do—to successfully sell to customers in China.

Zakkour, a principal at Tompkins International, and Molinksy paint a story of a businessman who fails at a presentation to Chinese customers because he doesn’t fully understand cultural differences and expectations. (So his name might be fictional, but I’d bet all of us have been in that man’s shoes at one time or another).

Don’t make the same mistake. Consider these important steps to make sure your cultural business transition is a smooth one:

  • Seek and accept help. Find a “cultural connector”—someone who has the skills to create a successful plan and can offer cultural insight to determine what you need to adjust.
  • Evaluate whether a culture’s existing best practices need a tweak or a major reframe. Tweaks require little effort but usually only skim the surface of deeper challenges that you may face. In most cases, you need to completely reframe your plan.
  • Be exclusive. To interest people in China, let them feel they have been singled out for an exclusive opportunity of status. This is especially important in China’s strong hierarchical society.
  • Take time to invest in personal relationships. In China, your business case must come from a trusted, credible source. Connections are crucial and can help legitimize your business.

If you’re interested in learning more about doing business in China, pick up a copy of Caught Between the Tiger and the Dragon, an entertaining book about one company leader’s rocky navigation through today’s global business environment.  Available in hard copy and e-book format, the book will help you better understand the realities of the business culture in China.

Best,

Jim

More Resources

Want to Sell to Chinese Customers? The Secret First Step

Asia Supply Chain Excellence Center

Podcast: E-Commerce in China

Leveraging Asia Supply Chains for Increased Value

China is Changing Supply Chains Around the World: Facts and Trends

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The $5 Fancy Cupcake & the Old Twinkie: Fickle Trends Demand Greater Automation in Food & Grocery

fancycupcakesWhen it comes to food trends, consumers can be fickle.

The Hostess Twinkie made huge headlines when its producer and distributor closed operations last year, and some were wondering how they would survive without the long-standing and popular sweet treat.

But the Twinkie will soon be back on store shelves after the Hostess snack cake brand and its assets were purchased by private equity firms who revived bakery production. But will consumers really care, or have they already moved on to other sweet products?

Speaking of sweet, for the last decade or so, retail sales of cupcakes have been a booming consumer trend. You can’t pass a group of stores these days without coming across a cupcake specialty store. But now, cupcake sales are down and customers are moving away from the fad, according to a recent Wall Street Journal article.

In the food and grocery industry, consumers are always looking for new products that meet their changing needs and tastes. So what can companies in this industry do to keep their customers happy?

Food distributors and grocery chains that automate their operations are at a big competitive advantage, because automation allows them to carry more varied products and SKUs. Automation in the food supply chain also increases operational efficiency and picking productivity in the warehouse.

What will be revealed as the next new food or beverage trend? I certainly don’t know, but I do know that whatever it is, this particular industry will be challenged to satisfy their customers.

You can find out more about the benefits of automation and how warehouses are adapting to changing consumer preferences in this new podcast, “Automation in the Grocery and Food Industry Supply Chain: The Final Frontier of the Warehouse.”

More Resources

Grocery, Food & Beverage Industries Hear Urgent ‘Click’ With New Service Models for Customer Delivery

Don’t Forget to Order the Milk – Customer Expectations and the Biggest Shift Happening Now in the Food and Beverage Industry

Photo Credit: Chris Breeze

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Competing Against Today’s Biggest Supply Chain Challenges

tippingmyhatI have often said that the job of being a supply chain leader is one of the most difficult jobs in a business.  So, I tip my hat to you.

I know, sometimes you can feel like you spend most of your day putting out “fires” and solving systematic issues. So, the Tompkins Supply Chain Consortium decided to explore this topic and question industry leaders about their greatest short-term and long-term challenges today.

The resulting hot topic report, Biggest Challenges for Today’s Supply Chains, reveals some interesting answers.

Industry executives—from manufacturers, retailers, and wholesale/distributors (just to name a few)—reported one of their greatest challenges is the rising cost of just about everything in the supply chain. From fuel and labor, to products and transportation, they are seeing costs go up. While this may not be a huge surprise, keep in mind there is also an added pressure to not only contain costs, but extract significant (sometimes double-digit) cost reductions from the supply chain.

In addition to costs, supply chain leaders will continue to be challenged to select and implement the right software/technology solutions. Better solutions will be available than most companies can keep up with. Businesses that stay ahead of the solution development curve and invest wisely in supply chain technology will increase the performance gap between themselves and those who don’t invest.

Also, on the top list of concerns and at the heart of many companies’ supply chain challenges are talent/people/labor. This will continue to be a major issue for the coming years. The needs exceed the capabilities, and the shortage of qualified employees will continue to accelerate.

So how do we fix this? Of course, there are no easy answers. You can begin by making sure your business has a game plan to identify and address the top supply chain challenges of your organization.

Read the full report to learn more about the challenges your specific industry is facing. Do you see these challenges in your supply chain? What steps is your business taking to overcome them?

GO! GO! GO!

Jim


More Resources

Top Supply Chain Challenges for Consumer Products Companies in 2013

Looking to China, India and Vietnam? Watch Out for Four Biggest Supply Chain Challenges


Photo Credit: Kheel Center, Cornell University

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Amazon: Nothing Can Stop Them – Because They Personify Long-Term Thinking

amazon-nothing-can-stop-themAmazon’s numbers are out for the previous quarter, and since Amazon is the company to watch, investors and news outlets are putting their earnings reports under a microscope.

Some are saying the numbers were good, but others are disappointed and concerned about the short-term challenges ahead for Amazon (sales tax changes in the US and vendor costs/relations are among these).

But their growth continues. Nothing can stop Amazon – and one of the big reasons is because they think long-term. Instead of making decisions based on short-term factors like today’s stock price, lingering recession anxiety, or other excuses, they are making decisions that benefit them for the in the long run.

The list of innovations from Amazon continues to grow. CNBC reported that Amazon’s revenue grew by 22 percent in the past quarter, partly due to its innovations in the areas of digital content and cloud computing. The most recent is a move to creating original entertainment via Amazon Studios, and the technology to bring that entertainment into people’s homes through the production of a television set box for streaming video.

Along with these innovations, they are not afraid to experiment and continue to make investments in the right things: Their people, technology, their supply chain, and other operations, including a move to same-day delivery options.

The long-term is where real business value lies today. Watch this video for more on how Amazon avoids the plague of short-term thinking in business and how they get it right.


If you are having trouble viewing the video, please click here to view with an alternative video player. You can also access YouTube’s help pages here.

Photo Credit: Aurelijus Valeiša’s

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J. C. Penney’s Biggest Challenge: Leadership ‘Got Mud in its Hair’ by Running with Ron Johnson’s Strategy

mudraceBusiness leaders and retail media are still trying to wrap their heads around what happened at J.C. Penney after its board pushed out CEO Ron Johnson.

They had brought Johnson on to take advantage of his experience with creating the highly successful Apple Stores, as well as for his previous work in establishing new brands to sell at Target.

But after Johnson’s 17 months at Penney’s, the numbers were quite staggering. (See more on Johnson’s performance by the numbers and also compared to Amazon’s Jeff Bezos and Wal-Mart’s founder Sam Walton in this article.)

Not many retailers can come back from a loss of nearly $1 billion in annual revenue.

I was just asked an interesting question about this situation. It was after my keynote address at a supply chain conference at the Sam Walton College of Business at the University of Arkansas. An attendee wanted to know: “Did Penney’s board of directors get exactly what it asked for?”

The board certainly knew that the Apple retail experience was successful. They jumped right into Johnson’s new strategies of removing coupons and special deals that customers expected from the retail chain. But his new multi-tiered pricing scheme confused shoppers, and without the coupons they craved, customers fled.

It reminds me of a charity ‘mud run’ that I attended recently. At the end of the course, the participants could opt to jump and slide down a long muddy pathway. Many people took the plunge, but I heard some complaining afterward that they got mud in their hair. Well, what did they expect from sliding in the mud?

The board at Penney’s is now experiencing the same thing: They brought in Johnson and didn’t think during all the excitement that they might not be applying the right strategy to the company, and they got mud in their hair. They were not actually listening to their customers.

He came onboard to apply the Apple experience to shoppers at Penney’s, but what got lost in the shuffle was that customers want four things: Great prices, awesome selection, a good shopping experience, and convenience. Without addressing these first, new retail strategies –no matter how fresh and exciting – won’t go anywhere.

More Resources

Read more about my thoughts on Ron Johnson and comparing his retail strategy to Jeff Bezos of Amazon and Sam Walton, founder of Wal-Mart

Download this feature, “A Closer Look at Retail Strategy: What J.C. Penney’s Ron Johnson Did Wrong and What He Did Right.”

Photo Credit: Official US Navy Imagery

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Ten Rules for Contract Manufacturing in China

Is your company producing or buying goods in China, or considering it? Then I’d recommend taking a look at Michael Zakkour’s Ten Rules for Contract Manufacturing in China recently featured in Material Handling & Logistics.

Zakkour, a China supply chain expert and principal at Tompkins, shares three overarching “must haves” for manufacturing in China. You need to have:

  1. A good supplier
  2. A good contract
  3. Good intellectual property (IP) protection

Zakkour’s top ten rules for working in China are broken down by what you should do before beginning your supplier search, the best way to execute your search, and how to cement a successful relationship with the supplier.

His tips can also help you avoid legal IP issues, narrow down the best supplier options, and learn how to ensure the quality that is promised to you.

Click here to read Zakkour’s top ten rules. Did any of his tips surprise you? Has your company followed any of these rules in your own experience manufacturing in China?

Best,

Jim


More Resources

Leveraging Asia Supply Chains for Increased Value

China is Changing Supply Chains Around the World: Facts and Trends

Podcast 85: E-Commerce in China

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The Amazon Cure: How Businesses Can (and Should) Create Long-Term Value and Leave the Island

You haven’t read about it in a travel magazine, or seen it in a commercial on TV, but many businesses have been vacationing on a new island. “Uncertainty Island,” that is.

This undesirable destination is marked by the inability to innovate and think with a long-term perspective. Excuses about politics, Wall Street, and global recession serve as diversions on this island. The result is a plague of short-term thinking that is spreading rapidly across company cultures today.

Fortunately, I have the solution in my latest video – The Amazon Cure.

A few months ago, you may have seen Tompkins’ video on the Amazon Effect, which talked about how e-commerce giants like Amazon are transforming the market. The Amazon Effect really hit a note with companies across the globe, and this year I wanted to offer a remedy for companies who are feeling this impact.

The Amazon Cure is all about promoting innovation and investing in your company’s future. Don’t get caught up in short-term “solutions,” whether they be firing some of your best executives or letting your decisions go adrift. The Amazon Cure follows the model steered by Amazon CEO Jeff Bezos, which values risk-taking and investments that promote sustainable growth.

Companies need to stop making excuses and follow the Amazon Cure with these four steps:

  1. Focus on the long-term investments and innovation that bring you real value
  2. Make mistakes and learn from those mistakes
  3. Have the persistence to keep working
  4. Focus on the customer

Check out the full Amazon Cure video, and also take a look at Tompkins’ most recent paper, Leveraging Supply Chains for Increased Long-Term Value, which explores the value creation framework to tap into new areas of innovation.

It’s time for businesses to catch a plane away from the horrible Uncertainty Island and look at long-term ways to be successful.

The plane is boarding — is your business coming?

Best,

Jim

More Resources

Amazon E-Commerce Reign Pushers Retailers to Step Up

Tompkins Podcast: The Amazon Effect

Photo Credit: gnuckx

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Has Inventory Really Gone Out of Style?

There are some fashion trends that I hope never come back in style. I’m sure you could guess a few (I’m looking at you, plaid bell bottoms).

Just like fashion trends, the way we do things often shifts and changes. With supply chains, we’ve seen a major shift in inventory to historically low levels. Inventory used to be kept high to accommodate customer demands, but today, fewer goods are in warehouses and DCs than ever before.

So, has keeping inventory as we once knew it really gone out of style?

DC Velocity recently published an interesting article called the “The End of Inventory,” which takes a look at how the Great Recession kicked inventory levels to an all-time low—and how they have (surprisingly) stayed that way.

Ralph Cox, inventory expert extraordinaire and a principal at Tompkins, said in the article that “The days of inventories driving macro-economic activity are over. Even the less-efficient, more-reactive retailers are adopting the technologies and processes needed to be more productive, and their operations run better today than they did five years ago.”

The growth of high-tech forecasting tools and Web-based “cloud” computing has kept inventory levels down, offering manufacturers better ways to view inventory patterns, adjust supply flows more quickly, and access data seamlessly at the same time.

What we’re looking at today are leaner retailers and an arguable expert conclusion that this new “perma-lean mode” isn’t going anywhere anytime soon.

What about your warehouses and DCs? Are you running under lower inventory, and is your company following the path toward global digitalization? Or maybe you’re still pining for those plaid bell bottoms?

Jim

More Resources

Finished Goods Inventory Levels Fall, While Customer Services Indicators Rise

Inventory Management Success Stories

The New Demand-Driven Operations Videocast

Photo Credit: Ran Yaniv Hartstein

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Transforming Your Pharmaceutical Supply Chain in Five Meaningful Steps

With today’s complex products and heavy regulatory requirements, revitalizing pharmaceutical and medical device supply chains can be a real pill. Have you seen some of the recent news about pharmaceutical supply chain improvements?

One in particular is a new guideline to identify, trace, and serialize pharmaceutical products using unique GS1 identification numbers.

The guideline helps pharmaceutical companies trace the movement of their products through supply chains – which in turn, creates increased security, visibility and control – and prepares for impending government requirements. (Read more about the new guideline here.)

With new initiatives like this in mind, I want to talk about how your supply chain can move with industry transformations. In Tompkins’ latest pharmaceutical column, we’ve outlined five significant steps to improve your supply chain operations:

  1. Strategy
  2. Fulfillment Process
  3. Organization
  4. Technology
  5. Continuous Improvement

No matter what industry you’re in, I’d love to hear in the comments how you are transforming your operations. What’s your biggest challenge? How are product changes and regulations impacting your supply chain?

Jim

More Resources

Five Steps to Transform Pharmaceutical and Medical Device Supply Chains

Lessons Learned From Pharmaceutical Supply Chain

Demand-Driven Opens New Doors: Four Areas to Transform in the Pharmaceutical and Medical Products Industry

Podcast: The Healthcare Market in China

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How Reinventing Your Supply Chain Is Like Racing in an Old Impala

Reinventing your supply chain: It can sound like a huge undertaking. And I’m certainly not going to tell you that it’s a simple process. However, you can’t let the size of a task deter you from something that will greatly benefit your organization.

Just start with the strategy and go from there. Once you break it all down – and set the right goals for your organization – it should seem a little more manageable. And it could even be exciting.

When I talk about reinventing, I mean creating a new or remade version of your current supply chain. You will be changing the appearance, form and presentation. Once the changes are in place, your supply chain operations will perform in ways that will require change management in terms of process, people and technology.

Start with a strategic plan, aligned with your business objectives. Only then can you begin to build a supply chain that efficiently meets the needs of all stakeholders. Strategy must precede structure. Know what you need before you take any action, or you may end up with the wrong facilities or design aspects.

Making this level of change requires a sound strategic plan and execution. The magnitude of the changes required to match the shifts in the marketplace cannot be underestimated.

Why? Because the demands placed on today’s supply chains are huge compared to those of just a few years ago. The level of change is similar to taking an old Chevy Impala and making it into a race car. (And even worse is turning me into a competitive race car driver.)

Reinvented supply chains must operate with speed, agility and visibility, while making use of all the resources available.

And the most important resource you will have this year is the 2013 Supply Chain Leadership Forum, which focuses on “Reinventing Supply Chains” as its main theme. The sessions and keynotes will show you how to achieve this goal through the powerful combination of supply chain strategy, organization/people, processes, technology and performance.

I hope to see you at the forum, August 26-28 in Atlanta.

Jim

More Resources

Supply Chain Leadership Forum Overview

Photo Credit: Hugo90

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Weathering the ‘Perfect Storm’: Major E-Commerce Competitors in Industrial Distribution Market Just Ahead

How do you prepare for a storm? When I know a winter storm is coming, I bulk up on food essentials, put on my warmest clothes and heat up some tea to fight off the chill.

Right now, industrial distributors need to know about and prepare for a new storm brewing.

Industrial distribution is at its biggest crossroads in history, and the “perfect storm” for transformation is looming. Maintenance, repair, and operations (MRO) customer expectations are at the center, with demands for increased customization, sophisticated e-commerce platforms, an “endless shopping aisle,” and faster delivery speeds.

Adding to this storm, the need for better online purchasing capabilities for MRO distributors are also higher than ever—just look at W. W. Grainger as an example. Since 2011, the company’s web traffic has grown from 3,000 to almost 11,000 hits per month. Due to gross margins that produce a hefty profit, plus the growing expectation for online sales, companies like Amazon are diving into the B2B MRO market with their own e-commerce sites, like AmazonSupply.

Recently, Google followed suit with its own MRO e-commerce space called Google Shopping for Suppliers. Google’s site connects buyers with global suppliers, while Amazon sells products directly to buyers. Which makes the most sense? So far, Amazon’s been the leader to watch, but we’ll see how quickly Google’s new capability captures the attention of suppliers. Take a look at Gaebler.com’s article on Google Shopping for Suppliers to learn more.

And to gain deeper insight into how to adapt and weather this storm, check out Tompkins’ latest paper, Industrial Distribution at a Crossroads.

Ask yourself what you can do to move with change and serve customers under their own terms. This is the key to what I call Multichannel Operations Excellence (MOE). MOE means reaching out to customers in new engaging ways, studying how to broaden your selection and availability, and integrating online/branch events with social media. It demands every aspect of the customer experience to be interactive, educational, engaging, and personalized—all through a variety of channels.

Don’t be a casualty to change by thinking that the Amazon Effect does not apply in industrial distribution. Be aware of your customers’ preferences, stay proactive, and be ready to expand what you offer and how you deliver it to make sure you’re not left out in the cold of this storm.

Jim

To read the full paper, please click here.

Photo Credit: MyBiggestFan

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